Monday, August 05, 2013

[Alex Rodriguez] is almost halfway through a 10-year, $275 million contract with the New York Yankees. Signed in December 2007, it replaced a 10-year, $252 million deal with the Texas Rangers…

“Ten, 20 years from now, if we’re sitting around talking about the worst contracts, those are the two that will immediately come to mind,” said Wayne McDonnell, an assistant professor of sports management at New York University. “Just in terms of dollars and cents, I think the two Alex Rodriguez deals will probably go down in history as being the worst.”...

“When the contract was signed, there was a lot of concern among not just Major League Baseball, but all sports for the dollars that were involved,” said Harvey Schiller, who was the chief executive officer of YankeeNets LLC, the team’s broadcast arm, when Rodriguez was acquired… “Whether he’s given the true value in terms of marketing, I would say no, especially when you compare him to Derek Jeter or even the value you get out of guys like (Curtis) Granderson or (Mark) Teixeira,” Schiller said. “For the Yankees, you’d have to say that dollar for dollar, there was a better investment in the rest of them.”

Determining the worst sports contract depends on whose perspective you are taking and at what point you are taking it, according to Andrew Zimbalist, an economist at Smith College in Northampton, Massachusetts, who has written a dozen books on the business of sports.

In looking at the most problematic U.S. sports deals from the vantage point of the day they were signed, “I’d say A-Rod’s was on top,” Zimbalist said of the Yankees’ contract.

From the perspective of how the signing helped build a franchise, the Rangers’ contract was worse, according to Andy Dolich, who has held operations-management positions in all four major U.S. sports leagues.

“You’re always going to look for a player to build the team around and increase net value,” Dolich, a sports business consultant for the London-based executive search firm Odgers Berndtson, said in a telephone interview. “I don’t think you could say he necessarily did that with the Rangers, and whatever the ultimate payout is going to be here at the end of these negotiations, it will really be a correcting error in the Yankees’ overall financial structure.”

The issue with both Rodriguez deals is their length, Zimbalist said… “It’s really problematic whenever you sign a player for 10 years,” Zimbalist said. “If A-Rod didn’t prove that, Albert Pujols is proving it now.”...

“I thought the Albert Pujols contract was a really good one at the time,” said J.C. Bradbury, a professor in the department of exercise science and sport management at Kennesaw State University in Kennesaw,
Georgia. “This guy has fallen unexpectedly. It’s bizarre.”

Bradbury, who’s analyzed contract values and written books including “Hot Stove Economics: Understanding Baseball’s Second Season,” said statistically Rodriguez’s deal in 2009, when the Yankees won their most recent World Series, was the worst in baseball.

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From 2001-2011 ARod put up ~75 WAR. Now, you can certainly make an argument that the Rangers over-paid relative to the market, or relative to what they could afford and still put a competitive team on the field, but I can't see how that could possibly be the worst contract in history, and the Yankees' deal with ARod is so dramatically worse that I'm not sure why they're even compared.

And assuming the Yankees deal was the worst at the time, it's likely the Howard deal eclipsed it later.

The first ARod contract was one of the best in history. And the Yanks could have gotten out of the "downside" part of it once ARod opted out.

The Rangers problem wasn't the ARod contract but the fact that the other $80 M on the payroll ended up producing very little. That other $80 M at the time was itself tied for the largest in the AL West.

The Yankees meanwhile got a massive gift. The Rangers were picking up something like $9 M a year so they got ARod for $16 M a year. In the first 4 years with the Yanks he produced 31 WAR so about $2M per WAR.

For his FA years, 2002-12, Jeter produced 39 WAR, about 3.5 per season at a cost of $207 M so over $5 M per WAR. Just counting his Yankee production to date, ARod is 52 WAR for $247 M, under $5 M per WAR. ARod wins.

If you want to talk about crappy contracts, Soriano is on 8 WAR for $119 with $17 to go. Wells is at 8 for $105 with $21 to go. Carlos Lee was 9 for $100. Zito is on 4 WAR for $119. Hampton put up 2.5 WAR for $120. Matt Kemp is off to an awful start at 2.5 WAR with $130 M to go. Crawford is at 1.5 WAR for $60 with about $80 to go. And Howard is at -.5 for $50 with $75 to go.

Granted, the $120 M or so they still owe ARod is a small problem. :-) But he still might outproduce Zito, Hampton, Crawford and Howard for roughly the same amount of money.

There's no way the first ARod contract can be characterized as "bad" much less one of the worst of all-time. In fact of "big" FA contracts, it's surely one of the best.

Even the second one .. he's produced 21 WAR for the first $155. That's not good return but it's not horrible. Now add on a Soriano contract and you're still at 30 for $275 ... really bad but a better rate of return than the ones mentioned above.

Bradbury, who’s analyzed contract values and written books including “Hot Stove Economics: Understanding Baseball’s Second Season,” said statistically Rodriguez’s deal in 2009, when the Yankees won their most recent World Series, was the worst in baseball.

how can an economist think that A-Rod was playing on a 1-year deal?
yet it's very hard to read this sentence as saying anything else......
could the reporter not have known?

another example of a phenomenon that must have a name: when you filter experts through journalists you end up below the level of laymen.....

The worst ARod contract has to be the Seattle 4 year contract. Either lock him up for more than 4 years or wait a year or two and then sign him up for 4 or 5 years. The Mariners botched virtually everything with him. They bring him up in July of 1994 despite the drums of work stoppage banging way non-stop in the background. They then give him almost 50 games in 1995 for no real reason and then finally bring him up for good in 1996. Bout oopsy, FA is now just around the corner and you wasted a whole year of service time on a teenager for 208 PA with a bunch of service time lost in a season that was meaningless. Bring him up in 1996 and you have him through 2001 and possibly with a good contract through 2003. That's roughly 60 WAR for probably under 20 million dollars.

Yeah, that first deal was a great one for the team. Ideally from the team perspective he would have finished it in 2010. Then they get the 2009 series, a victory tour, and cut ties right when the hip acts up. As it was, he gave them plenty of value for 2001-07.

It comes down to giving a 10 year deal to a 25 year old or a 32 year old.

Agree with everyone. These quotes are just astonishing. Is there any possible way of reading them in better light? Because otherwise we're expected to just accept that a bunch of economists apparently know literally nothing about assessing value whatsoever.

Well ... there's always the hope they were misquoted! Seriously, the Rangers contract probably was an overpay. It's not clear who they were bidding against and the next closest deal I believe was Manny at 8/$160 (which I think had enough deferred money it was more like $18 M per). So the Rangers may have spent, oh, $25 M more than they had to. (a good chunk of the Rangers contract was deferred too ... they're still on the hook for $40 M) That still doesn't come close to making it a bad contract.

One of the guys is also assessing it as "ARod was supposed to be the face of a winning franchise" contract and, since that didn't happen, it was a bad contract. That's defensible in a way -- i.e. the contract didn't work out like it should and, incorrectly, became emblematic of bad contracts -- but it's not the fault of ARod or the contract that the Rangers didn't win ... and it's not ARod's fault that the Rangers were dumb enough to either grossly overspend their revenues and/or panic in thinking they had to eat tens of millions to move his contract.

Geez, I underestimated ... the Rangers gave the Yanks (up to) $71 M in that trade. Unbelievable how little the Yanks were paying Rodriguez (another factor they seem to have glossed over completely from the Yanks perspective). The Rangers got out from under about $30 M of that when ARod opted out. Anyway, I think the Rangers ended up paying something like $105-110 M to ARod which is a lot for 3 years (and 25 WAR!). But they paid $65 M to Chan Ho Park for 0 WAR (plus -1 WAR from Nevin).

The only thing ARod in Texas proves is that baseball is not a one-man game even if that guy is producing at historic levels.

I detest this argument. The Rangers problem contract was not A-Rod's; it was Chan Ho Park's. And Tom Hicks financial acumen with not only the Rangers, but the Stars and Liverpool might be called into question as well.

“I thought the Albert Pujols contract was a really good one at the time,” said J.C. Bradbury, a professor in the department of exercise science and sport management at Kennesaw State University in Kennesaw,
Georgia. “This guy has fallen unexpectedly. It’s bizarre.”

Really? It is bizarre that a 32 year old who had just lost 100+ points of OPS and had the worst year of his career, and who has been battling foot injuries for several years, all of a sudden is no longer a mega elite player?